U.S. trade panel favors stiffer duties on Chinese tires

By Susan Cornwell

WASHINGTON (Reuters) - A majority of the U.S. International Trade Commission recommended on Monday that President Barack Obama impose additional duties for three years on imports of low-cost Chinese tires the panel says are harming U.S. industry.

In a case seen as a test of how the Obama administration will cope with Chinese trade issues, four members of the six-member commission recommended that Obama impose additional duties of 55 percent in the first year, 45 percent in the second year, and 35 percent in the third year on imports of passenger vehicle and light truck tires from China.

"In our opinion, these tariff levels would remedy the market disruption that we have found to exist," the four said in a statement. The complaint was brought by the United Steelworkers union, which said a surge of Chinese tire imports have cost thousands of U.S. jobs.

Two other members of the commission disagreed, saying Obama should take no "trade-restricting" action because this would do more harm than good.

"This is an industry in which the trend toward gradual downsizing appears likely to continue regardless of the commission's action today," the two dissenters said in a statement. But they joined the majority in urging that the Obama administration provide aid to displaced tire workers under the U.S. Trade Adjustment Assistance program.

The trade commission will formally submit its recommendations to Obama in a report next month. He will then have until September to decide what, if any, action to take. He can embrace, modify or ignore the commissioners' proposals.

Trade experts are watching to see whether Obama, who criticized China for what he called unfair labor practices during his campaign and won strong labor support in his bid for the White House, will be tougher on China than predecessor George W. Bush.

Bush routinely rejected petitions for restricting Chinese imports.

The case is one of several prickly trade issues between the United States and China, Washington's second-largest trading partner behind Canada. Tensions have been exacerbated by the growth in the U.S. trade deficit.

Earlier Monday, China complained about U.S. investigations that could lead to duties on Chinese steel imports, saying they were a shocking sign of trade protectionism.

The steelworkers, who filed their complaint in April, argued that some 5,100 U.S. workers have lost jobs because of low-price Chinese tire imports that hit 46 million in 2008. They want Obama to restrict Chinese tire imports to 21 million.

The steelworkers cited closings of U.S. plants by Goodyear, Continental Tire and Bridgestone/Firestone, and said more closings are pending.

Chinese tire producers countered that U.S. companies largely abandoned the low-cost tire market before Chinese manufacturers moved in. They also noted that no U.S. tire producers had joined the steelworkers' complaint.

Vic DeIorio, executive vice president for sales of Chinese tire maker GITI in the United States, said he was disappointed that four of the six trade commissioners "felt compelled to take a decidedly protectionist path."

"If there is a barrier placed on tires produced in China, U.S. manufacturers and distributors will simply increase importation of tires from other countries, such as Venezuela. What's more, duties will result in higher tires prices for American consumers at a time when they can ill afford it," DeIorio said in a statement.

(Editing by Philip Barbara)